CIOs will have the opportunity to move away from the traditional scenario of spending 80% of their budget on maintenance and 20% on innovation if they harness cloud computing technologies.
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This in turn will raise the expectations put on CIOs from the boardroom, who will expect IT to drive business innovations.
Cloud computing is shaking-up competitive landscapes as companies of all sizes can access the same resources and reach similar markets as a result. But if businesses want to take full advantage of the cloud, CIOs will have to clearly define the opportunities for the wider business and not just the IT department.
The technology environment becomes more scalable and dynamic in the cloud and it is possible through cloud-based resources for IT departments to punch above their weight. Through access to unlimited compute power on a pay-as-you-use basis, companies of any size can have new systems up and running in hours rather than weeks.
Traditionally to create systems, unless IT departments had spare capacity, they would have to get hold of some computing power in the form of servers. This would take some time because they would have to go through the long process of requesting the kit and having it approved and integrated. But through the cloud they have instant access and are charged for what they use.
The benefits to the IT department are easy to quantify in time and money savings but for the business to increase its market reach or develop new routes to market, for example, will require innovation from the CIO.
Dan West, CIO at online clothing retailer Asos, says IT leaders have the opportunity to innovate and test things out without taking huge risks.
“You can deploy a cloud-based development environment in five minutes and if it fails you are not left with resources you don’t need,” he said.
The overheads related to buying, integrating and managing new servers is not required in a cloud environment, says West.
As an online-only retailer Asos is more aware than most about the opportunity to grow business using technology. It is using Microsoft’s Azure cloud computing platform to support its growth. For example Asos, has put an application programming interface into Azure to extend its reach through mash-ups.
Rob Fraser, CTO of cloud services at Microsoft and former CIO at RiskMetrics, says cloud requires a business response, and as such cloud strategy needs to belong to the boardroom, and not just be considered something within the technology organisation: “A solely IT-focused approach will deliver internal innovation, but may well miss the bigger external disruptions to which the business must respond.”
Recent research by IDC revealed that 67% of CIOs believe their job is evolving to a "chief innovation officer" and they expect to have more money to spend on innovation. IDC says CIOs expect the innovation budget to grow between 23% and 28% over the next three years.
Cloud computing will be an important part of these innovations, says IDC: “We predict 2012 will be the year that the majority of CIOs start to employ the four pillars (cloud, mobile, social, and big data/analytics) to realise business innovation.
“2012 will be a turning point as the impact of cloud services and the consumerisation of IT reach a critical mass. CIOs have the experience to lead this transformation and they are ready to step up.”
First and foremost there is work to be done by the CIO to understand both the internal-facing and customer-facing clouds.
Fotis Karonis, CIO at mobile network Everything Everywhere, agrees that the cloud strategy should not lie completely on the plate of the CIO.
But he says CIOs will play an important role to take their businesses into the cloud. He says the cloud has two sides to it that might require different approaches and lots of testing.
“The core applications that the business uses cannot always go straight into the cloud. You first have to build an awareness of the cloud,” he said.
Karonis says businesses will begin to do this using private clouds and linking to services in the public cloud. While internal systems can be consolidated in private clouds, businesses can reach more customers through public clouds.
Everything Everywhere, which is the UK joint venture between Orange and T-Mobile, is currently running a project to move 40% of of its internal systems to a private cloud within three years.